Jobs Data, U.S. Action Vs. Venezuela in Focus

0:05Welcome to the Schwab Market Update Podcast, where we prepare you for each trading day with a recap of recent news and a look at what's ahead.

0:17I'm Keith Lansford, and here is Schwab's early look at the markets for Monday, January 5th. First, a note. After we recorded Friday evening, news broke of U.S. military action against Venezuela and the arrest of its president, Nicolas Maduro. Amid the resulting uncertainty, Wall Street might experience more volatile trading today and early this week. Also, crude oil prices, which finished Friday near one-year lows, might get choppy. For the latest updates, tune into the Schwab Network, which begins broadcasting at 8 a.m. Eastern Time, or refer to the Schwab Market Update daily newsletter, which will be published before the open on schwab.com.

0:59Looking beyond Venezuela and to the rest of the week, a host of jobs data awaits participants back from the holidays. Job openings and ADP employment get the parade started Wednesday, and the highlight is Friday's December non-farm payrolls report. Stocks struggled in the holiday-shortened week, and today is traditionally the final day of the Santa Claus rally period that didn't deliver much of a boost this year. Earnings remain sparse before fourth quarter reporting season starts, with big banks a little over a week from now. The largest U.S. banks quietly enjoyed an impressive fourth quarter of stock market performance, as S &P financials led all sectors in performance during the final month of 2025, with gains of nearly 3%.

1:43Soon after today's open, investors received December's ISM manufacturing PMI. This report has been gloomy over the last year and fell to 48.2 % for November. That's well below the 50 % needed for expansion. In fact, the index hasn't had an expansion month in nearly a year, despite the Trump administration's efforts to bring manufacturing back home. Analysts don't expect much change in December, with estimates below 49 percent. This could reflect light new orders seen in the November report. Other items to monitor in the data are prices paid, which inched up to 58.5 percent in November, and employment, which fell to 44.0 percent.

2:26That's a combination that suggests stagflation in the manufacturing sector, Briefing.com noted when November's data arrived. A strong or weak jobs report Friday could play into the Fed's thinking for 2026. Analysts now think the U.S. economy added about 65 ,000 jobs in December, according to FactSet. November saw 64 ,000 new jobs, but data were wobbly due to the government shutdown, and it wouldn't be surprising to see revisions. If the soft jobs data that started in mid-2025 continues, it might give the Fed more ammunition to slice rates. However, weakness in the jobs market could ignite fresh worries about the U.S.

3:06economy and consumer spending, typically not bullish for stocks, even if rate cut odds rise. Another item to monitor in coming days is CES 2026, a global tech trade show that starts tomorrow focusing on robotics, AI, and wearables. The show features an address by Jensen Huang, CEO of NVIDIA. Huang holds a press conference there early this afternoon.

3:34Stocks struggled the last five sessions since record highs the day after Christmas, and the S &P 500 index ended up lower for December, its first monthly drop since April. Technically, the S &P 500 remains in a range, with its upper and near all-time closing highs of around 6 ,930. Participants haven't shown much buying enthusiasm at levels above 6 ,900 since the index first arrived there in late October. However, a strong earnings season might help sentiment. Lack of catalysts and concerns about valuations in the tech sector kept the market treading water the last two months. There's also concern about what's ahead.

4:16Though earnings could unleash some animal spirits if they're positive, Supreme Court decisions on tariffs and President Trump's attempted firing of Fed Governor Lisa Cook loom as soon as this month. Each could ignite volatility, especially if the court rules in the administration's favor. Support-wise, the 50-day moving average now rests just above 6 ,800 for the S &P 500 index. That moving average has generally held up over the last few months, despite a couple of tests below it. One wild card is the jobs market. Futures trading still anticipates two to three rate cuts this year, but a recovery on the jobs side might sap the Federal Reserve's enthusiasm about any cuts at all.

5:00Several policymakers said at the December meeting that they had tilted between cutting and pausing that month, and some seemed prepared to wait a while to see how the economy performs now that it's had three rate cuts since September. The futures market priced in 17 % odds of a January rate cut as late as Friday, according to the CME FedWatch tool. Another wildcard is Treasury yields, which climbed five basis points last week to 4.19 % for the 10-year note. That's near recent highs and could hurt rate-sensitive small caps, homebuilders, and dividend payers. U.S. crude oil futures fell below$57 a barrel at Times Friday near the low end of their recent range, as Reuters reported that OPEC and its allies would likely keep production unchanged at their meeting this weekend.

5:49Crude had its largest annual drop since 2020 last year, falling nearly 20 percent. Silver futures climbed 1 % Friday to quietly wrap up a wild week for metals trading. Friday's first day of trading of 2026 resembled 2025 in at least one way as semiconductor stocks outpaced software stocks. This trend goes back a while and reflects worries that AI might hurt demand for software tools. Shares of Adobe and Salesforce fell 4 % and 3 % respectively by late Friday, though there wasn't any major sector-specific or company-specific news. Chip stocks traveled in a different direction, rising about 4 % as a sector, and led by some of the same familiar names that keyed last year's rally, including Micron, Western Digital, Taiwan Semiconductor Manufacturing, Intel, and Advanced Microdevices.

6:46NVIDIA also rose, but only 1 percent and far behind the leaders, remaining 10 percent beneath October's all-time highs. The chip rally Friday got sparked by a 15 percent gain for Chinese tech firm Baidu after its AI chip unit filed an application to list on the Hong Kong Stock Exchange, Barron's reported. This news eased concerns about possible slowing demand for chips to power data centers, though earnings and guidance later this month from big players like Meta Platforms and Amazon are yet to come. Overall, the S &P 500 index managed to avoid a five-session losing streak, rising late in Friday after falling earlier.

7:26The Nasdaq composite, however, fell fractionally and is down five sessions in a row. Small caps and the Dow Jones Industrial Average performed well Friday. Sector-wise, energy led with 2 % gains Friday, despite a drop in crude oil prices, as investors awaited OPEC's weekend production decision. Continued geopolitical tension in Venezuela and Ukraine might be giving energy companies a lift. Several of the major oil firms rose 3 % or more Friday. Market breadth improved Friday despite the light index gains, with 8 of 11 sectors up. Consumer discretionary weakened under pressure from Tesla. Individual trading on Friday outside of tech saw homebuilders like Lennar and KB Home rise, despite the climb in Treasury yields.

8:15Caterpillar rose more than 4.5 percent, and Boeing also climbed 4 percent amid strength in the industrial sector. Caterpillar is seen as a play on strength in mining due to being a supplier of mining equipment, Briefing.com pointed out. Boeing got a boost from news early this week that it had been awarded a$2.7 billion Army contract. Defense contractors Northrop Grumman and Lockheed Martin also rose 2 % or more Friday. Tesla fell about 2 % Friday after reporting fourth-quarter vehicle deliveries of 418 ,227. Consensus was for deliveries of around 422 ,000 vehicles, down from 497 ,000 in the third quarter and 496 ,000 in the fourth quarter of 2024.

9:03Wayfair and RH rose more than 6 % and 9 % respectively after the Trump administration announced it would delay an increase in furniture tariffs for a year and Rivian fell more than 1 % Friday after reporting it produced 42 ,284 vehicles and delivered 42 ,247 in 2025 both in line with the company's expectations

9:31The Dow Jones Industrial Average gained 319.10 points Friday, or 0.66%, to 48 ,382.39. The S &P 500 Index rose 12.97 points, or 0.19%, to 6 ,858.47. and the Nasdaq Composite lost 6.36 points or 0.03 % to 23 ,235.63. For the week, the Dow Jones Industrial Average fell 0.67%, the S &P 500 dropped 1.03%, and the Nasdaq slid 1.52%. This has been the Schwab Market Update Podcast. To stay informed, visit www.schwab.com slash market update or follow us for free in your favorite podcasting app. And if you like what you've heard, please consider leaving us a rating or a review. It really helps new listeners find the show.

10:31Join us for another update tomorrow.

10:39For important disclosures, see the show notes and schwab.com slash market update podcast.